Judge allows sale of Lincoln paper mill to a liquidator

A lawsuit alleges that three board members of the bankrupt Lincoln Paper and Tissue mill in Lincoln, shown in 2005, kept an insurance payout rather than use it to repair a boiler that exploded in 2013. Press Herald File Photo/Shawn Patrick Ouellette

Despite an 11th-hour objection by union workers, a federal judge Friday approved the sale of Lincoln Paper and Tissue for $5.95 million to a Boston-based liquidator of industrial assets.

The United Steelworkers, which represents the mill’s roughly 175 workers, Friday morning filed an objection to the impending sale after Keith Van Scotter, the mill’s CEO, told employees in a late-night email Thursday that the deal did not include the union’s collective bargaining agreement.

Related Headlines

The judge overruled that objection and approved the sale to a joint venture firm led by Boston-based Gordon Brothers Group, which won the auction for the mill Thursday, according to Sam Anderson, the attorney representing the paper company. The deal is expected to close in early December, Anderson said, leaving an uncertain future for the employees.

Gordon Brothers is not likely to try to find a buyer for the mill that would allow it to continue making tissue, said Jeffrey Young, an attorney for the United Steelworkers.

The union objected to the deal as an asset sale, which means Gordon Brothers can acquire the mill and its paper machines and equipment, but not the existing agreements or contracts.

Bankruptcy code requires “that before a contract can be rejected, the (new owner) must first make a proposal to the authorized representative of the employees and confer in good faith in an attempt to reach mutually satisfactory modifications to the collective bargaining agreement,” according to the court filing written by Young.

Duane Lugdon, the United Steelworkers’ district representative, said he spoke with “Mr. Firestone,” a representative of the Gordon Brothers, after the auction Thursday about whether there was interest in maintaining operations of the mill, according to the filing.

“Mr. Firestone was noncommittal but promised upon request to contact Mr. Lugdon later that evening,” the filing says. “Mr. Firestone did not contact Mr. Lugdon.”

No proposals were made to the union and no negotiations have occurred, the filing said.

While the mill has continued to operate during its bankruptcy, it has been “ratcheting down” in the past few months, Anderson said. One tissue machine was stopped before bankruptcy papers were filed, another was shut down in the last month and the last one will likely be shut down before the deal’s closing, he said.

“I envision it will be a skeleton crew” at the time of the sale, Anderson said Friday.

The mill, which never recovered from a boiler explosion in November 2013, filed for bankruptcy protection in late September. The damage from the explosion shut down its pulp and uncoated paper-making operations, which accounted for roughly 40 percent of the mill’s revenue. Although the mill’s tissue machines were quickly restarted, neither the pulp mill nor paper machines resumed operation.

As a result, the mill’s revenue fell from $145.3 million in 2013 to $70 million in 2014, according to court documents. Its revenue through mid-October this year was $55.5 million.

Managers of the Lincoln mill had held out hope that its new owner would consider reviving the tissue operation since the market for tissue is increasing slightly.

INDUSTRY IN TRANSITION

The Lincoln bankruptcy is the latest bad news to befall Maine’s paper industry, which has been clobbered by foreign competition, energy costs and shrinking demand.

Two Maine paper mills have been put up for sale within the past two years – the former Great Northern mill in East Millinocket and Verso’s former mill in Bucksport.

In both cases, the buyers were liquidators and scrap-metal recyclers – Hackman Capital Partners purchased the East Millinocket mill at a bankruptcy auction in December 2014, while AIM Development bought Verso’s Bucksport mill the same month.

Demolition of the Bucksport mill is expected to begin Nov. 30, according to the Ellsworth American.

Last week, Verso said it is considering restructuring, which could include filing for bankruptcy or selling its mill in Jay.

Despite the gloomy news, the paper industry held a summit this week saying there are still bright spots, including data showing more than $173 million is planned for Maine mill upgrades and improvements this year – the most investment since 2003.

The industry continues to provide significant jobs in Maine, with more than 4,500 employed and an average annual wage of roughly $71,000.

Here at MaineToday Media we value our readers and are committed to growing our community by encouraging you to add to the discussion.

To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use. Click here to flag and report a comment that violates our terms of use.